We just have to face the fact that in today’s challenging life scenario, raising children have become more expensive, but not impossible and some of the factors of that are :
1. Rising Inflation
2. Heavy Increment in Education Prices
3. Change In Life Style
I still remember those days of schools & colleges where the fees in the past were around Rs. 3000 to Rs. 5000 for studying through bachelor’s degree or maximum 50,000 – 1,00,000 for an MBA Degree.
Forget about the Barbie Dolls, A Dingo for your kid, or a Cost of Video games, this are now necessity, the education Fees for playschool alone is costing 50,000 to 1,00,000 per year. Tough to understand but it’s a fact now a days. And mind it as here we are talking about some serious kind of money for most of the people of India, to be precise, the average income of an Indian individual is less than Rs. 45,000 per annum. Most of the parents come to know the importance of Education Planning when the kids actually demand the money to go to school or college.
Everything includes cost as Now the scenario has changed, Education level, Facilities like Studying through internet, online education, all electronics & gadgets have entered into the field of education, Overseas University have brought the state of the art technologies, from which kids / students can study sitting at home on the computer or via video conferencing. Now schools and colleges provide the forms online, which has reduced the cost of the school and colleges, but as education industry is rising at tremendous pace.
From Luxury to Necessity: Why we need to Invest?
As India is one of the fastest growing economy across the world & almost 25% of the population is between the age of 25-35, the life style changes are very frequent as people are having more disposable income, they wants to own a house, luxurious car, a vacation abroad have become necessity for the people, same for their kids (going to school in a brand new car / a laptop / Air-conditioned schools & colleges ) such aspirations and dreams have emerged seeing the flow of income on regular basis, the same scenario happens in every growing economy (as reported in United States Of America in 1980), The Internet cost incur as the technology has taken place in such a way that kids are desperate to be on social network talking and discussing their home work and managing group discussion and sharing notes on the internet, before 10 years we have never thought this will happen after a decade, such things. Parents are willing to send their child abroad for schooling now a days which costs more than Rs. 15,00,000 to Rs. 20,00,000 today. The same will cost Rs. 20,00,000 to 26,00,000 if I take a nominal 6% Inflation (Education Cost in India has increased in excess of 10% Every year)
YOUR Kids Education - Three simple ways to Plan It :-
1. Start Early - Let your money Work for Your Kids :
Investing Early can boost your child education Kitty in a significant manner , i.e. if one invest Rs. 1000 starting today for next 5 years will grow to Rs. 89,688. The same amount if started 5 years early can bring 2,78,657 to the table. It’s just the simple compounding effect which works more as you stay more in the fund.
2. Top Up Your Investments : Best for your Child's Education kitty
We get bonuses, extra incomes, gifts on kids birthdays – just add that to the kitty, so that you can reach to your kids education goal early than you have planned. People in general think that Rs. 10,000 Top up investment will not make huge difference, but let me bring to your kind notice that Rs. 10000 Invested for 15 Years will become Rs. 81,370 @ 15% CAGR & if one top up his/her kitty as and when they get extra money, the goal will get completed sooner than you have planned.
3. Invest in a Product which can earn more returns than prevailing inflation rate:-
Little tough to understand, If Inflation is 8%, & FD Rate is 6% for a year Rs. 100 Invested in an FD will be worth Rs. 106 & Inflation is 8% ,means the thing you were getting at Price of Rs. 100 before a year is now worth Rs. 108 & your money has grown by 6% to Rs.106 Only. Still short of Rs.2, this in some years will bring down your purchasing power & capital too. One should earn at least more than inflation rate. Study shows that Gold has marginally outperformed Inflation & Equity has beaten Inflation with far better margins in long run.
- Manan Mankad
follow us on twitter : www.twitter.com/mananmankad
Like us on Face Book : http://www.facebook.com/pages/Msquaremoneymanage/145622288822696